The Ethanol Fallacy

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The Ethanol Fallacy: Op-Ed
America needs smart alternative to oil, but the just-passed energy bill puts too much emphasis on the wrong alternative, PM's editor-in-chief says.
By James B. Meigs
Published in the February 2008 issue.

The idea is so appealing: We can reduce our dependence on oil—stop sending U.S. dollars to corrupt petro-dictators, stop spewing megatons of carbon into the atmosphere by replacing it with clean, home-grown, all-American corn. It sounds too good to be true.

Sadly, it is.

Of course we need alternatives to oil. The world uses a cubic mile of petroleum each year, and demand keeps rising as the global economy booms. At first glance, corn seems like a heaven-sent substitute. American corn farmers are the most productive in the world, growing far more of the grain than we can possibly eat, and exporting mountains of the stuff to other countries. And the corn kernel is a marvel of energy storage. Converting that compact bundle of starches into alcohol is a relatively simple trick known to generations of moonshiners. So why not build corn liquor stills on an industrial scale and use the output to power our cars and trucks?

That’s exactly what this country has been doing for the past several years. Some 134 ethanol plants are now in operation, consuming close to 1.6 billion bushels of grain, about 15 percent of our total corn production. To feed the ethanol machine, farmers planted almost 93 million acres of corn in 2007, a 19 percent increase over the previous year, and the highest figure since 1944 (when yields per acre were far lower).

The result is that the country is now experiencing an ethanol glut. Prices are sagging—as are plans to build ethanol refineries from sea to shining sea. Yet many in Washington seem determined to force still more ethanol into the system. The just-passed Energy Independence and Security Act of 2007, which President Bush has said he will sign, mandates corn ethanol usage of 15 billion gal. a year (more than three times today’s consumption) by 2015. And presidential candidates have outdone each other with vows to flood the nation with ever-increasing rivers of ethanol for at least a generation.

It’s great that our politicians have discovered the need for new energy technologies. But it appears that Washington is determined to put its money—our money—on the wrong horse. Right now, researchers are studying a host of energy solutions, including hydrogen, high-mileage diesel, plug-in hybrids, radical reductions in vehicle weight and cellulosic ethanol (made from cornstalks, switchgrass or other nonfood crops). It is far too soon to say which of these holds the most promise. But, instead of promoting experimentation and competition to find the best solutions, politicians seem ready to declare ethanol the winner. As a result, our nation could wind up with the worst of both worlds: an “alternative” energy that is enormously expensive yet barely saves a gallon of oil.

Let’s start with the math. Corn doesn’t grow like a weed. Modern corn farming involves heavy inputs of nitrogen fertilizer (made with natural gas), applications of herbicides and other chemicals (made mostly from oil), heavy machinery (which runs on diesel) and transportation (diesel again). Converting the corn into fuel requires still more energy. The ratio of how much energy is used to make ethanol versus how much it delivers is known as the energy balance, and calculating it is surprisingly complex.

The National Renewable Energy Laboratory states that, “Today, 1 Btu of fossil energy consumed in producing and delivering corn ethanol results in 1.3 Btu of usable energy in your fuel tank.” Even that modest payback may be overstated. Skeptics cite the research of Cornell Uni¬versity professor David Pimentel, who estimates that it takes approximately 1.3 gal. of oil to produce a single gallon of ethanol.

If the benefits are in doubt, the costs are not. It would take 450 pounds of corn to yield enough ethanol to fill the tank of an SUV. Producing enough ethanol to replace America’s imported oil alone would require putting nearly 900 million acres under cultivation—or roughly 95 percent of the active farmland in the country. Once we’ve turned our farms into filling stations, where will the food come from?

There’s a simple reason that ethanol is popular with politicians: money. Substituting corn ethanol for a large fraction of the gasoline we burn will mean sluicing gushers of cash from more populated states to politically powerful farm states. And a lot of that cash will wind up in the pockets of the big agribusinesses, like Archer Daniels Midland, that dominate ethanol processing—and whose fat checkbooks wield enormous influence in Washington.

In fact, governments generally have a bad track record when it comes to picking technologies. In the midst of an earlier oil crunch, President Jimmy Carter seized on “synfuels”—refined from oil shale deposits—as a panacea. Oops. Synfuels turned out to be woefully uneconomic, environmentally disastrous and feasible only with massive government subsidies. It took years to kill the program off—and the last of the multibillion-dollar tax credits just expired in 2007.

The corn ethanol boondoggle threatens to be far, far worse. If enacted, current proposals will amount to a huge hidden tax on consumers, with benefits flowing to the politically connected. Once set in motion, such a program would be all but impossible to stop—even if other alternatives, like cellulosic ethanol, turn out to be vastly superior. And every dollar spent on corn ethanol is a dollar not spent on those other, more promising approaches.

So what should the government do? First off: no harm. Instead of trying to mandate specific technol¬ogies—and risk locking us into using the wrong one—Washington should create incentives to help the market choose the best approaches. One step would be to reward consumers for conservation: There are vast opportunities to make our homes, businesses and vehicles more efficient, and to make our economy stronger in the process.

Perhaps someday corn ethanol will prove itself a viable part of our energy mix. But corn liquor is powerful stuff, and it can make people do strange things. Let’s keep it out of Washington’s hands.